RFID Market for Retailers Forecast to Grow 39% Annually

In a new report, Frost & Sullivan predicts that yearly RFID revenue will reach $5.4 billion in 2020, due to increased omnichannel sales fueled by better understanding of the technology by retailers, more online purchases, and the increased tagging of goods by product manufacturers.

A new report from Frost & Sullivan finds that sales of RFID readers, tags and software to the retail sector will grow from $738 million in 2014 to $5.409 billion in 2020, reflecting a compound annual growth rate (CAGR) of 38.9 percent.

When Ram Ravi, a Frost & Sullivan electronics and security industry analyst, met with RFID vendors at the RFID Journal LIVE! 2014 event in Orlando, Fla., he noticed that their confidence level had changed in comparison with previous conversations he had had with them. Both hardware and software companies indicated that the "tipping point" had been reached at which RFID technology use became commonplace for retailers. Ravi also carried out subsequent research and conversations with RFID technology vendors and end users, and incorporated all of his findings in a report titled "Analysis of the Global RFID Market in Retail," released last month.

Frost & Sullivan's Ram Ravi

Ravi's analysis determined that the RFID market for the retail sector is growing because retailers have begun to better understand the technology's benefits. The applications for which RFID is used include inventory management, monitoring customer behavior and loss prevention.

"We've reached a point where passive RFID has become a very attractive proposition for retailers," Ravi says, "and they are seeing value in the technology moving forward."

According to Ravi, while apparel is driving RFID adoption at this point in time, another promising area of growth in the retail sector is in perishable foods. As with apparel, meat, fresh produce and other perishable products will be tagged with EPC Gen 2 ultrahigh-frequency (UHF) labels in order to track food items from the time they are first packaged, through the supply chain, and into the store. In this way, companies will be able to reduce the percentage of spoilage that, in turn, leads to the high cost of wasted product.

Most retail RFID usage has occurred in North America and Europe, Ravi's analysis finds. However, he says, he expects that there will be considerable growth during the next few years in India as well, thanks to that country's increased presence of smartphones, as well as disposable incomes. He adds that China is expected to be another large growth area.

In India and China, as well as in North America and Europe, such growth is being fueled primarily by consumer behavior. Specifically, shoppers are using their phones and tablets to make purchases, and expect to pick up or receive products quickly following those purchases. Customer expectations have put pressure on retailers to treat their physical stores as distribution centers from which online purchases can be fulfilled, and has also encouraged the launching of online retailers that have no physical store presence at all, but rather a keen interest in ensuring that goods are distributed to the areas in which purchases are being made very quickly.